Battle lines drawn in Zimbabwe’s indigenisation crusade

ZIMBABWE’s central bank has issued a withering attack on President Robert Mugabe’s economic indigenisation programme, calling it a ‘reckless’ initiative championed by ‘vultures’. Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono (pictured, left) believes that the “indigenisation crusade is being championed by a number of senior and well-connected personalities who are already positioning themselves to muscle into certain mining, manufacturing, banking and other entities that are currently performing well.”

Gono’s uncharacteristically harsh verdict on a policy that Mugabe sees as his swan song has exposed the festering conflicts within the octogenarian leader’s Zanu PF party over the controversial regulations. The programme is being driven by Youth Development and Indigenisation Minister Saviour Kasukuwere, a rising star in Mugabe’s party who built his sprawling business empire as a black empowerment crusader in the 1990s. Kasukuwere’s gung-ho style has stoked sharp disputes with Prime Minister Morgan Tsvangirai and his MDC colleagues in the unity government.

Kasukuwere (left) bypassed both cabinet and the Prime Minister’s policy formulation unit – the Council of Ministers - when he gazetted the regulations, and also ignored the complaints of Industry and International Trade Minister Welshman Ncube. He has been quick to jab right back following Gono’s scathing attack on the ‘content’ and ‘style’ of the indigenisation programme.

“We have seen the criticism from the Reserve Bank governor this week again and will only take note of (him) when the governor stops his megaphone criticism,” Kasukuwere told the press recently. "We remain determined to empower our people and we will not accept such criticism from individuals seeking relevance,” he added dismissively.

Gono first made his intervention on the indigenisation policy through a mid-term monetary statement in October 2007. He called on the government to ensure that the empowerment drive does not end up as an orgy of self-enrichment by a few, well-connected elites as had happened with land reform and other earlier empowerment programmes. The central bank suggested a gradual indigenisation structure that envisages foreign companies worth in excess of US$500m to achieve 20% local ownership in 5 years, moving to majority local ownership by the 15th year.

In sabre-rattling fashion, Gono threw down the gauntlet in response to Kasukuwere’s sneer: "I stand by what I said in October 2007 and what I also said last week. I see no reason to shift positions. I repeat: There should not be and will not be farm-type jambanja (gang violence) this time around as we indigenise and empower our people. We are all witnesses to what can inadvertently happen when that is allowed to take place and we cannot be a people who do not learn from yesterday's implementation shortcomings."

Gono, who is also Mugabe’s personal banker and family friend, claims to enjoy the support of both Mugabe and Tsvangirai and says that his concerns have been fully acknowledged by the leaders of the inclusive government. "Fortunately, all players who have the country at heart, including my principals, are all seized with the matter and assured the governor that there will be no such thing."

To buttress Gono’s claims, Kasukuwere has been forced to yield to Tsvangirai’s demand for a thorough revision of key provisions of the indigenisation regulations and to have cabinet debate them fully before they can be implemented. According to press reports in Harare, the revisions will be structured along the lines of South Africa’s Broad Based Black Economic Empowerment (BBBEE), which was gazetted in 2007 following complaints that the initial Black Economic Empowerment (BEE) scheme had only enriched a few blacks.

Analysts said that it remains to be seen how far the empowerment regulations will be revised as Tsvangirai has not wielded much power in the shaky coalition. In recent weeks, Mugabe stripped several MDC ministers of their powers and handed them to his own ministers.

The Indigenisation and Economic Empowerment Act was passed by a then-Zanu PF dominated parliament in 2007 but only came into force in January this year with the gazetting of regulations by Kasukuwere. The regulations apply to all businesses in Zimbabwe with an asset value of or above US $500 000, although it does not specify whether this refers to net assets or share capital, issued or nominal.

The regulations empower the Minister to establish a database of people who want indigenous Zimbabweans to acquire an interest in their businesses, and of indigenous Zimbabweans who wish to “partner” those people. The new regulations treat white Zimbabweans as foreign, and they too will be compelled to cede 51% of their businesses to ‘indigenous’ Zimbabweans. Failure to fulfil these legal requirements will invite a fine of US $2 000 or five years’ imprisonment, or both.

The new legislation reserves key sectors of the economy for indigenous ownership including the production of food and cash crops, transportation, bakeries, retail and wholesale trade, and estate agents. The Affirmative Action Group (AAG), a militant pro-indigenisation lobby with organic links to Zanu PF, has come out in full support of the new regulations. The group said it will use force to eject all Nigerians running businesses in the country’s cities and towns to create space for black Zimbabweans. Nigerians and Asians have been among the most active investors in the sectors now proscribed by the new law and had battled on through the worst phase of the country’s hyperinflationary crisis.

Kasukuwere has dismissed allegations of discrimination, insisting that the programme was an inclusive one. The youthful politician belongs to a crop of Zanu PF Young Turks that include Mugabe’s nephew Patrick Zhuwawo and former Mashonaland East Governor Ray Kaukonde. Kasukuwere struck it rich whilst still an officer in Mugabe’s dreaded Central Intelligence Organisation.

Along with other young Zanu PF-aligned treasure hunters such as the flamboyant and wealthy Phillip Chiyangwa (another Mugabe nephew), Kasukuwere forcefully pushed the indigenisation agenda through the AAG, amassing an empire stretching from farms to oil procurement and distribution. He has had to consistently bat away accusations that he is representing the interests of greedy Zanu PF barons who are keen to get rich without breaking sweat.

However, the economic fallout from the land seizures has persuaded others within and around Zanu PF to come out in defence of Gono’s criticism of the indigenisation crusade. Jonathan Kadzura, a Harare businessman and respected economic commentator with close links to Zanu PF, strongly condemned the idea of empowerment through expropriating private capital and called on people to start their own businesses.

“Essentially, in business you have to be original if your business is to succeed. It becomes extremely difficult to do well in a business whose vision you never created,” he said. Kadzura echoed popularly held fears that the indigenisation programme may only enrich a few individuals who have also benefited from other affirmative action programmes instituted by the government in recent years.

In his 2007 statement, Gono expressed particular concern over “any attempts to forcibly push the envelope of indigenisation into the delicate area of banking and finance.” He invited those who wanted to go into banking to apply for licences to start their own banks. Ironically, Gono shut down several black-owned banks after he became governor in 2003, accusing them of speculative behaviour and undermining the national economy.

Standard Chartered, Stanbic, MBCA and Barclays are the major foreign-owned banks still operating in Zimbabwe. Kasukuwere has ordered them to start lending to locals, ‘or ship out’.

The negative impact of the new regulations has already begun to register on the economy.

“Last month we raked in about US$5 million while months before that we were raking in more than US$20 million a month. Since the regulations were gazetted we have seen a negative impact on trade. Last year our market was driven by foreigners, making up to about 45 -50 percent of the total turnover of about US$200 million on the ZSE,” chief executive of the Zimbabwe Stock Exchange Emmanuel Munyukwi said.

Zimbabwean companies need re-capitalisation because they do not have working capital and the ZSE was beginning to see a number of transactions where foreigners were coming in to rescue these companies, Munyukwi explained. “Whether these transactions will proceed we do not know because they were coming in to under-write some of the transactions,” he added.

Two leading German bodies - the Hamburg-based German African Business Association and the German-Southern African Chamber of Industry and Commerce in Johannesburg - have called off a proposed investment mission to Zimbabwe. Andreas Wenzel, Southern African manager of the Hamburg GmbH association, was quoted as saying: 'Under the current circumstances Zimbabwe is a no-go area for foreign investment.'

South African platinum mining giant, Impala Platinum has approved a US$500 million expansion programme for its Zimbabwe operation, Zimplats, but says implementation depends on clarification of the country’s indigenisation laws and settlement of a US$34 million debt owed by RBZ.

Some of the foreign-owned companies that have deserted Zimbabwe in recent years include Mobil, Coca-Cola, Lever Brothers and Heinz. Nestle was recently threatened with expropriation after it had stopped buying milk from the Mugabe family’s farms.

Following the government’s total disregard of his 2007 warning, a wistful Gono told the press recently: “My heart is heavy that this advice was not listened to, as over two years down the road the controversies around this issue are deepening as opposed to abating.”